ASSET MANAGEMENT: Company Has Opportunities to More Effectively Manage and Safeguard Maintenance-of-Equipment Inventory

Submitting OIG:

Amtrak (National Railroad Passenger Corporation) OIG

Report Description:

Our objective was to evaluate the effectiveness of the company’s processes and controls for managing and safeguarding its inventory. We found that the Procurement and Supply Chain and the Mechanical departments recently began improving inventory management, but they continue to face challenges strategically managing Maintenance-of-Equipment inventory in ways that have operational, customer service, and financial impacts. For example, the company faces challenges in achieving an appropriate inventory balance, providing an effective ordering system, and safeguarding inventory from risk of loss or theft. We also identified $14.4 million in inventory items that the company will likely never use again—funds that Amtrak could have put to better use. We recommended that the company implement processes to improve inventory data, develop strategic inventory goals, assess the costs and benefits of carrying surplus and obsolete inventory to determine which materials to sell or scrap, and implement processes to safeguard inventory.

Date Issued:

Monday, February 26, 2024

Agency Reviewed / Investigated:

Amtrak (National Railroad Passenger Corporation)

Submitting OIG-Specific Report Number:

OIG-A-2024-004

Location(s):

Agency-Wide

Type of Report:

Audit

Questioned Costs:

Funds for Better Use:

Number of Recommendations:

Report updated under NDAA 5274:

View Document:

Attachment	Size
OIG-2024-004-Inventory.pdf	1.81 MB

Additional Details Link:

https://amtrakoig.gov/node/10631/

Recommendation Number	Recommendation Status	Significant Recommendation
1a	Open	Yes
Develop and implement a process to ensure that the data used for MoE inventory demand forecasting and replenishment more accurately and reliably reflect consumption. At a minimum, this should include better tracking of employee practices that distort consumption data, such as enforcing the requirement to track the use of parts cannibalized from other units.
1b	Open	Yes
Develop and implement a process to regularly and consistently review and update inventory attributes that the company relies on for forecasting and replenishment, such as reorder points and lead times.
2	Open	Yes
Develop and document strategic goals and metrics for inventory management that align with the company’s broader goals. Options might include measuring how frequently an MoE inventory shortage causes a train to be delayed and the extent to which MoE inventory shortages impact the company’s service capacity.
3	Open	Yes
Establish a process to regularly assess the costs and benefits of carrying surplus and obsolete inventory to determine which materials to sell or scrap. Based on this assessment, determine what portion, if any, of the $14.4 million of obsolete MoE inventory the company should attempt to recover.
4	Open	Yes
Assess the costs and benefits of updating inventory item information in the company’s inventory management system. At a minimum, assess the costs and benefits of updating, clarifying, and standardizing item names, descriptions, units of measure, and accompanying photographs, as well as options for doing so. Based on this assessment, determine what actions, if any, to take.
5	Open	Yes
Develop and begin implementing a risk-based plan to secure inventory facilities across the company.
6	Open	Yes
Develop and implement a process to consistently and regularly monitor for abnormal inventory use. This should include clearly assigning responsibility for managing this process on an ongoing basis.
7	Open	Yes
Develop and implement a process to consistently and effectively apply ordering limits to the inventory system, as appropriate.

Recommendation Number

Recommendation Status

Significant Recommendation

Additional Details

Open

Yes

Develop and implement a process to ensure that the data used for MoE inventory demand forecasting and replenishment more accurately and reliably reflect consumption. At a minimum, this should include better tracking of employee practices that distort consumption data, such as enforcing the requirement to track the use of parts cannibalized from other units.

Open

Yes

Develop and implement a process to regularly and consistently review and update inventory attributes that the company relies on for forecasting and replenishment, such as reorder points and lead times.

Open

Yes